Exam 12: Contributed Capital

Treasury stock is reported as an asset on the balance sheet because treasury shares may be sold later.

A liquidating dividend is usually paid when a company is going out of business or reducing its operations.

In its 2010 annual report, Gamma Company indicated that the number of common shares held in the treasury decreased from 45,546,171 in 2009 to 3,397,381 in 2010. The following also was reported: By Board authorization, effective December 31, 2010 the Company cancelled 50 million shares of common stock held in treasury. As a result of the cancellation, common stock decreased by $125 million, capital in excess of par value of stock decreased by $228 million, and retained earnings decreased by $3,119 million. The shares cancelled or retired represent almost 25 percent of the shares of common stock issued by Gamma. Explain the accounting for the treasury shares by Gamma. Did the company buy any treasury shares during the year? Prepare the entry in journal form that was made to record the cancellation or retirement of the treasury shares. At what average price were the treasury shares purchased, and at what average price were they originally issued? What do you think was management's reason for purchasing the treasury shares? (Omit explanations.)

On its December 31, 2009 , balance sheet, Montrose Corporation reported its stockholders' equity as follows: During 2010 , the following transactions occurred: Reacquired 2,500 shares at $7 per share. Sold 1,200 shares of treasury stock at $8 per share. Sold 500 shares of treasury stock at $6 per share. Net income for 2010 amounted to $80,000. a. Prepare the entries in journal form for the three transactions involving treasury stock. (Omit explanations.) b. Compute the amount of total contributed capital to be reported on the December 31, 2010 , balance sheet.

Stockholders who own preferred stock usually have voting rights, whereas stockholders who own common stock usually do not have voting rights.

Prepare in proper form the stockholders' equity section of the balance sheet from the following selected accounts and balances taken from the adjusted trial balance of Waller Corporation as of December 31, 2010.

Convertible preferred stock is preferred stock that may be exchanged for

The word preferred in the phrase preferred stock means that an owner of preferred stock has some advantages over a bondholder.

Use the following information to answer the question below. The following transactions involving Lupine Corporation occurred during the year: Apr) 1 Purchased 2,000 shares of its own preferred stock for $20, the current market price. This is the first transaction involving its own stock engaged in by the company. May 3 Sold 400 of the shares purchased on April 1 for $25 per share. June 5 Retired 600 of the shares purchased on April 1. The original issue price was $10. The par value of the stock is $5. The entry to record the April 1 transaction is :

Dividends yield equals

The board of directors of Irondale Corporation declared a cash dividend of $2.50 per share on 57,000 shares of common stock on June 14, 2010. The dividend is to be paid on July 15, 2010, to shareholders of record on July 1, 2010. The effects of the entry to record the payment of the dividend on July 15, 2010, are to

Brandt Corporation is authorized to issue 100,000 shares of $5 stated value common stock and 2,000 shares of $100 par value, 8 percent preferred stock. Prepare entries in journal form without explanations to record the following transactions:

Use the following information to answer the question below. When Calvert Corporation was formed on January 1, 2010, the corporate charter provided for 50,000 shares of $20 par value common stock. The following transactions were among those engaged in by the corporation during its first month of operation: 1. The corporation issued 200 shares of stock to its lawyer in full payment of the $5,000 bill for assisting the company in drawing up its articles of incorporation and filing the proper papers with the state agency. 2. The company issued 8,000 shares of stock at a price of $25 per share. 3. The company issued 7,000 shares of stock in exchange for equipment that had a fair market value of $160,000. The entry to record transaction 2 is

Define outstanding stock.

When stock is issued for noncash assets or services, the dollar amount to be recorded for this exchange is determined by the

A good measure of confidence in a corporation's future is

If there is no change in the number of shares authorized and issued from one year to the next, but there is a change in the number of shares outstanding on those same dates, how would you explain that change?

Holders of common stock must be made aware of possible restrictions on common dividends when the preferred stock is

How should dividends in arrears be shown on a corporation's balance sheet?

A company purchases 600 shares of its $100 par value common stock at $110 per share. It then reissues 100 shares at $114 per share. The entry upon reissue of the stock is